Indonesian Seafood Supply Chain · Chapter 6 Indonesian Seafood Supply Chain Suadi and Eiichi Kusano August 2019 This chapter should be cited as Suadi and E. Kusano (2019), ‘Indonesian

Chapter 6

Indonesian Seafood Supply Chain Suadi and Eiichi Kusano

August 2019

This chapter should be cited as

Suadi and E. Kusano (2019), ‘Indonesian Seafood Supply Chain’, in Kusano, E. (ed.), Food Value

Chain in ASEAN: Case Studies Focusing on Local Producers. ERIA Research Project Report

FY2018 no.5, Jakarta: ERIA, pp.134─163.

134

Chapter 6

Indonesian Seafood Supply Chain

Suadi* and Eiichi Kusano

1. Introduction

The total population of Indonesia in 2017 reached 263,991,379 people; it is still growing

about 1.1% annually.1 The growing population needs a measurable and good food supply

system because, based on the consumption patterns of Indonesians, food expenditure is still

very dominant, especially in the lower class of society. The World Bank indicated that

Indonesian expenditure for food and beverages on average was about 49%.2 Nevertheless,

the expenditure of the lowest class for food reached 56%. The monthly per capita

expenditure in 2013–2017 also showed no significant change of proportion of expenditure

for food and non-food consumption. Both expenditures share half of household expenditures.

Processed food and drinks share 32.7%, followed by cereals (11.6%) and fish (7.7%). In

addition, food expenditure increased on average about 8.6% per year.

The Indonesian economy is still growing and has potential to grow faster. Indonesia’s gross

domestic product (GDP) at current US$ reached $1,015.54 billion with annual GDP growth

about 5.1%. Its GDP per capita at current US$ also increased from $3,113.4 in 2010 to

$3,846.86 in 2017. The World Bank projected that Indonesia’s GDP may grow to 5.3% in

2021. 3 Unfortunately, the role of agriculture, forestry, and fishing as the main food

production sector tends to decline year to year, with contribution only at 13% of GDP (value

added) in 2017, from 14% in 2010. On the other hand, importation of certain commodities

has been increasing remarkably in order to fulfil the country’s food needs Indonesia imported

various food products such as salt for half of the total national need, 70% of soybean, 12% of

corn, 15% of peanuts, 90% of garlic, 30% of beef, and 70% of milk (Husodo, 2014). FAOSTAT

also depicted that based on data of net trade, the value of imported food, particularly for

cereals and preparations, fruit and vegetables, meat and meat preparations, and dairy

products (milk equivalent) is higher than export, except for fish and seafood that are mostly

produced for export. The net trade of fish increased from US$1,566 million in 1995 to

US$3,503 million in 2016.4

According to the International Trade Centre’s top 20 export potential products of Indonesia

to the world, seafood products, particularly frozen shrimp and prawn, placed tenth. The

product performance shows the big potential to occupy the global market (unrealised

* Department of Fisheries, Gadjah Mada University, E-mail: [email protected] 1 https://data.worldbank.org/country/indonesia?view=chart 2 http://datatopics.worldbank.org/consumption/country/Indonesia 3 Ibid no. 2. 4 http://faostat.fao.org/static/syb/syb_101.pdf

135

potential of 42%), if the technological level improved and the prices are better or stable.5 As

an archipelagic state, Indonesia has a great opportunity to develop its marine and fishery

sector to produce food from the sea. For capture fishery development, the maximum

sustainable yield is projected to reach 9.9 million tons/year, based on the recent stock

assessment,6 with total production of 6.4 million tons in 2017.7 Meanwhile, the potential

area for aquaculture, which includes mariculture, is about 12.1 million ha; brackish water

culture, 3.0 million ha; and freshwater cultivation, 2.2 million ha – capable of producing 16.7

million tons. The potential of aquaculture is not only based on the two-dimensional aspect

of the space, but three dimensions of the water area (including the depth of water). This fact

shows the big potential of fish and seafood production in Indonesian fishery. However, there

are several challenges in promoting good management of the fish business: some are caused

by the country’s archipelagic state with scattered islands and production centres, limited

production infrastructure and supporting facilities, high logistic cost, low product quality, and

lack of human power. As an example, the recent report of the EU-Indonesia Business Network

(EIBN) showed the main production site in the eastern part of Indonesia (share 65% of

national production) still lacks cold storage. The cold storage is available in the city around

the provincial capital instead of fishing ports (EIBN, 2016). As result, cold storages are left

empty most of the time because they are far from the fishing port or lading place.8

This chapter aims to describe the situation of the Indonesian seafood supply chain through

literature and case studies on different industry and seafood commodities. This chapter

covers the following issues: overview of roles and trend in food retailing, food consumption

and regulation, case studies of seafood supply chain, and challenges and opportunities of

Indonesian seafood development.

2. Retail Market and Food Retailing in Indonesia

Modern retailers in Indonesia total about 30,000 units, with total company or owner of about

600. Only 25% of retailers transformed to digital; about 75% still rely on the conventional

approach. Various modern retailers in Indonesia include modern stores, department stores,

boutiques, factory outlets, specialty stores, trade Centres, and malls/supermalls/plazas.

However, the main market in Indonesia is the traditional market, numbering more than 4.5

million. USDA (U.S. Department of Agriculture) (2017) showed that the total number of

outlets is also growing, such as convenient stores (15.6% per year) and hypermarkets (11.3%).

However, traditional grocery retailers are not growing; they even declined in 2011–2016. The

modern food retailers are owned by both domestic and multinational companies. The

growing interest of consumers in modern outlets because of their good performance, better

nutritional information, safe-to-eat products, and convenience will soon result in the modern

food retailers’ capturing the traditional food retailers’ market share (Toiba et al., 2013). As a

5 http://www.intracen.org/country/Indonesia/General-Trade-Performance 6 Ministry of Marine Affairs and Fisheries Decree Number 47/2016 7 http://sidatik.kkp.go.id/publikasi/index/12 8 https://indonesien.ahk.de//fileadmin/AHK_Indonesien/Publication/PDF_Publication/-EIBN/EIBNSe

cRep2016_ColdStorage_FULL-19984.pdf

136

result, the rapid growth of the modern market has challenged the existence of the traditional

market. Thus, the traditional market needs to adapt to the changing consumer choice while

government support for innovative strategies is needed.

Figure 6.1: Number of Retailers in Indonesia

Source: USDA (2017).

Until 2017, almost 90% of the modern markets consisted of two groups, Alfamart (42.57%)

and Indomaret (47.61%). These two convenience store groups increased in number, with

Alfamart growing 2.04% and Indomaret, 1.97%.9 However, other big stores like Ramayana,

Giant, and Lottemart decreased.

The market value of supermarkets and hypermarkets was reported to be growing. In 2015–

2018, supermarkets grew about 8.84% (compound annual growth rate [CAGR]), and

hypermarkets at about 9.43% (CAGR). Unfortunately, the market value of department stores

decreased by about 11.07% (CAGR), from Rp92.38 trillion in 2015 to Rp64.62 trillion in 2018.

Some factors caused the decline, such as shift in buying behaviour to e-commerce, an

increase in fixed costs which triggers a decline in competitiveness, and slowdown of the

national economy. Some department stores started to close many of their outlets. However,

the market value of the e-commerce industry grew 66.45% (CAGR) for 2015–2018, from

Rp16.22 trillion in 2015 to Rp72.75 trillion in 2018 (USDA, 2017). This increase was also

supported by the development of e-commerce in various types such as marketplace,

customer-to-customer, and business-to-business e-commerce. The main advantages of e-

commerce are cutting distribution and logistics lines, streamlining fix costs, and providing

more product variations.

In general, the market value of the modern retail industry in Indonesia was estimated to grow

10.15% (CAGR) for the period 2015–2018, from Rp289.6 trillion in 2015 to Rp386.97 trillion

in 2018. Food segment and fast-moving consumer goods or FMCG (for minimarkets,

9 http://duniaindustri.com

16.0 21.0 22.9

25.3 27.7

1.4 1.6 1.9 2.1 2.4

4.5 4.6 4.6

0

1

2

3

4

5

6

0

10

20

30

40

50

60

2013 2014 2015 2016 2017

Tra

dit

ion

al r

eta

iler

s (M

illio

n)

Co

nve

nie

nce

sto

res

an

d

hyp

erm

ark

ets

(Th

ou

san

d)

Convenience stores/minimarkets Hypermarkets/supermarkets

Traditional retailers

137

supermarkets, and hypermarkets) were estimated to grow 12% (CAGR) in 2015–2018, from

Rp181 trillion in 2015 to Rp249.6 trillion in 2018. This food segment and FMCG are classified

as stable growth supported by the expansion of outlets. Table 6.1 shows the growth trend of

modern retail market in Indonesia.

Table 6.1: Growth Trend of Modern Retail Market in Indonesia Items 2015 2016 2017 2018

Overall market value of retail modern industry (Rp trillion) 289.6 314.82 342.73 386.97

Growth (%) - 8.7 8.86 12.9

Market value of food & FMCG retail (Rp trillion) 181 199.1 219 249.6

Growth (%) - 10 12 14

Portion of food retail & FMCG to overall market (%) 62.5 63.24 63.9 64.5

Market value of department store to total retail industry (Rp trillion)

92.38 85.89 70.09 64.62

Market value of e-commerce (Rp trillion) 16.22 29.83 53.64 72.75

Growth (%) - 83.91 79.81 35.63

Portion of e-commerce to the total food & FMCG retail (%) 5.6 9.48 15.65 18.8

Market value of minimarket (Rp trillion) 101.36 112.49 125.27 146.01

Growth (%) - 10.98 11.36 16.55

Portion of minimarket to total food & FMCG retail (%) 56 56.5 57.2 58.5

Market value supermarket (Rp trillion) 36.2 38.82 42.05 46.67

Growth (%) - 7.23 8.32 10.98

Portion of supermarket to total food & FMCG retail (%) 20 19.5 19.2 18.7

Market value hypermarket (Rp trillion) 43.44 47.79 51.68 56.92

Growth (%) - 10.01 8.14 10.14

Portion of hypermarket to total food & FMCG retail (%) 24 24 23.6 22.8

FMCG = fast-moving consumer goods.

Source: http://duniaindustri.com

Related to the distribution channel of the food sector in the retail industry, the GAIN Report

(USDA, 2017) showed that food supply may come from the local/domestic food suppliers and

import. The food will then be placed and distributed by distributors to various channels. From

the distributors, it will be channelled to the wholesalers, hypermarkets, supermarkets, and

minimarkets.

138

Figure 6.2: Typical Indonesian Retail Food Sector: Distribution Channels

Food manufacturer Importer/agentDistributor

Branch of big distributorDirect delivery in Jakarta & part of

Java: wholesale, hypermarket,

supermarket, minimarket

Outside major/big cities: sub-

distributor

Distribution center-wide nations:

wholesale, hypermarket,

supermarket, & minimarket

Traditional

independent

store/street

vendors/

warung

Minimarket

outlets

Wholesale

hypermarket

supermarket

outlets

Hypermarket,

supermarket,

minimarket

outlets

Wholesale

outlets

Street

vendors/

warung

Minimarket

outlets

Small depot/

traditional

independent

store

Sub -

distributor

Hypermarket,

supermarket,

minimarket

outlets

Street

vendors/

warung

Minimarket

outlets

Street

vendors/

warung

Minimarket

outlets

Street

vendors/

warung

Minimarket

outlets

Street

vendors/

warung

Street

vendors/

warung

Minimarket

outlets

Source: USDA (2017).

3. Food Regulation

Food policy in Indonesia is basically regulated by Law No. 18/2012 on Food. According to this

law, food supply must be sufficient; safe; of high quality; affordable; and in harmony with

religion, beliefs, and culture. Domestic food production should be prioritised over imports

(EIBN, 2017). There are also Government Regulation No. 69/1999 on Label and Food

Advertising and Government Regulation No. 28/2004 on Food Safety, Quality and Nutrition.

In addition are various related ministerial and other institutional decrees related to food

issues.

The food regulations cover the issues on food safety, food quality and nutrition, food

importation and exportation into and out of Indonesian territory, control and supervision,

and community participation. Food regulations cover all aspects of the food/fish business

process. In addition, new Law No. 33/2014 on the halal product assurance will also affect the

food business process. Article 4 of Law No. 33 clearly states that products that enter, circulate,

and trade in the territory of Indonesia must be halal certified. Therefore, halal certification is

become an important instrument in the food business process in Indonesia.

139

Figure 6.3: The Regulation Aspects of Food Policy in Indonesia

Source: Author.

4. Current State of Indonesia’s Fish and Seafood Industry

Fish does not only play an important role in income generation, employment, nutrition, and

food security for many countries; it has also become a source of foreign currency earnings,

particularly for many developing countries. By definition, fishery in Indonesia is defined as all

activities relating to the cultivation and utilisation of fish resources and their environment,

starting from pre-production, production, processing, up to marketing. Therefore, fishery is

a business system that manages fish from the pre-production to the end market.

Exports of fish by developing countries, including Indonesia, rose from 37% of world trade in

1976 to 54% of total fishery export by 2014, valued at US$80 billion. In 2014, fishery net

export revenues in developing countries reached US$42 billion, higher than other major

agricultural commodities and even combined (FAO, 2016).10

China is a main fish producer and the largest exporter country. Norway places second as it

supplies diverse products to the global market. Viet Nam is the third major exporter,

overtaking Thailand (FAO, 2016). As an exporter country, Indonesia is still less competitive

than Viet Nam and Thailand even though it is the second-largest producer of marine fish in

the globe after China.

Fish production in Indonesia basically comes from capture fishery and aquaculture. The share

of production from aquaculture grew rapidly to more than 20% per year before 2014 while

production from capture fishery slowed down. Both fish production sources might be

expanded as the fishery resources become available to exploit and land and aquatic

10 http://www.fao.org/documents/card/en/c/2c8bcf47-2214-4aeb-95b0-62ddef8a982a (accessed 24 October 2018).

140

resources to cultivate. A 2016 fish stock assessment reported about 9.9 million tons of fish

stock, while fish production in 2017 was only about 6.4 million tons.11 However, there are

several challenges to developing the seafood industry, such as production infrastructure and

supporting policy.

Figure 6.4: Indonesian Fish Production Profile A. Production quantity

B. Annual growth rate

Source: BPS, https://www.bps.go.id/statictable/2014/01/16/1711/produksi-perikanan-menurut-subsektor-ribu-ton-1999-2016.html (accessed 22 February 2019).

The fish products are fresh (including frozen fish) and processed. Processed fish products,

such as dried/salted and boiled, underwent traditional or simple processing. There are

various types of processing, including surimi and canning.

11 Ibid. Nos. 8 and 9.

6.37.9

9.7

13.314.3

15.6 16.0

5.05.3 5.4

5.7 6.0 6.2 6.1

0.3 0.4 0.4 0.4 0.4 0.5 0.5

0

5

10

15

20

2010 2011 2012 2013 2014 2015 2016

mil

lio

n to

n

Aquaculture prod. (mil. ton) Marine fisheries prod. (mil. ton)

Inland water fish. prod. (mil. ton)

3326

22

37

8 925 6

2 5 6 3

-1

177 7

1

126

-2

-20

0

20

40

60

2010 2011 2012 2013 2014 2015 2016

%

Aquaculture prod. (%) Marine fisheries prod. (%) Inland water fish. prod. (%)

141

Figure 6.5: Variation of Indonesian Fish Products, 2014

Source: Ministry of Industry (2017).

In 2010–2014, the production of processed fish products increased from 4,081,618 tons

(2010) to 5,199,930 tons (2014). The average growth of the product was about 6.35% per

year with the highest growth occurring in 2011 at 13.82%.

National fish consumption increases year by year and reached more than 40 kg/cap/year.

The largest fish consumption in 2014 was found in Maluku Province (54.12 kg/cap/year),

Southeast Sulawesi (50.77 kg/cap/year), Riau Islands (49.24 kg/cap/year), North Maluku

Province (48.88 kg/cap/year), West Papua Province (48.16 kg/cap/year), and North Sulawesi

Province (47.83 kg/cap/year). The provinces with the largest growth (above 10%) included

the Special Region of Yogyakarta (DIY12) (22.28%), West Nusa Tenggara (14.78%), Central Java

(12.31%), DKI13 Jakarta (11.46%), and East Java (10.12%). In fact, DIY is one of the provinces

with low fish consumption (21.74 kg/cap/year) but has potential to increase consumption of

fish commodities.

12 Special Region of Yogyakarta: Daerah Istimewa Yogyakarta (DIY). 13 Special Capital Region of Jakarta: Propinsi Daerah Khusus Ibukota (DKI) Jakarta.

142

Figure 6.6: Indonesia Per Capita Fish Consumption

Source: SIDATIK (Data Dissemination Information System and Marine and Fisheries Statistics), 2016.http://statistik.kkp.go.id/sidatik-dev/Berita/Analisis%20Angka%20Konsumsi%20Ikan%202010-2015.pdf (accessed 23 February 2019).

Figure 6.7: Indonesia Per Capita Fish Consumption, 2015 (kg/cap)

Source: Indonesia Ministry of Marine Affairs (KKP) http://statistik.kkp.go.id/sidatik-dev/Berita/Analisis%20Angka%20Konsumsi%20Ikan%202010-2015.pdf (accessed 23 February 2019).

Indonesia's main fishery export products are shrimp, tuna, cob, skipjack, seaweed, crabs, and

pearls. On the other hand, Indonesia also import fish products such as fish flour and

fresh/frozen fish. In 2010–2017, the export value increased but declined in volume. In 2010,

the export value was US$2.70 billion, and increased to US$4.48 billion in 2014. In 2015, due

to various policies issued by the Ministry of Marine Affairs and Fisheries (MAF), the export

30.48 32.25 33.89 35.2138.14

41.11

0

10

20

30

40

50

2010 2011 2012 2013 2014 2015

Co

nsu

mp

tio

n (

kg/c

ap

)

143

value decreased to US$3.77 billion. The export value in 2017 was almost the same as 2014

(about US$4.36 billion) but volume was still lower than in 2010–2104.

Figure 6.8: Trends in Indonesia’s Fish Export and Import, 2010–2017

Source: UN Comtrade.

Figure 6.9: Value and Volume of Indonesia’s Fish Export, 2010–2017

Source: UN Comtrade.

Asian countries are the main export market for Indonesia’s fish and seafood products,

followed by America and Europe. The United States is the main market, followed by Japan

and China. This data shows a major shift in the main market for fishery products for decades

– from Japan (whose share during the 1980s was more than 80% and in the 1990s, more than

50%) to new markets in America and Europe.

Several challenges in the fish and seafood industry development of Indonesia need

appropriate strategies.

Lack of Feasible and Well-managed Fish Harbour

The fishing ports in Indonesia are divided into four classes: ocean fishing port or PPS (class

A), nusantara (archipelagic) fishing port or PPN (Class B), coastal fishing port or PPP (class C),

and fish landing base or PPI (class D). The differences in the port class are based on the

capacity and services that can be provided. Class A means the port is equipped with complete

2.70 3.35

3.74 4.01 4.48

3.77 3.99 4.36

1.05 1.11

1.20 1.22 1.23

1.04 1.03 0.99

0.9

1.2

1.5

1.8

0

2

4

6

2010 2011 2012 2013 2014 2015 2016 2017

mil

lio

n to

n

bil

lio

n U

S$

Export value (billion US$) Export quantity (million ton)

144

facilities (primary, functional, and supporting facilities) for the largest scale fishery to operate.

The total number of fishing ports is 818 units. There are 6 units of PPS, 15 units of PPN, 47

units of PPP, one of which is managed by the Ministry of MAF and the 46 are managed by the

provincial government. Meanwhile, there are 748 units of PPI and two units of private fishing

ports (Figure 6.10). This information shows that the majority of fishing ports only support

traditional and small-scale fishery and modern fishing harbours are lacking to support large-

scale fishery.

Figure 6.10: Distribution of Fishing Ports in Indonesia Based on Class, 2015

Source: SIDATIK (2015).

Weak Structure of the Capture Fishery Industry

Indonesian fishing vessels are small-scale motorboats with less than 5 gross tonnage [GT]).

They number 153,493 units or 68.97%, followed by 41,374 units (18.59%) of vessels of 5–10

GT, and 14,301 units (6.43%) of 10–20 GT. Overall, the total number of fishing vessels

increased in 2009–2014. However, the increasing number was dominated by motorboats

with less than 5 GT (from 105,121 units to 153,493 units), 5–10 GT motorboats (from 32,214

units to 41,374 units), and those with 10–20 GT (from 8,842 units to 14,301 units).

6 15 47

748

20

100

200

300

400

500

600

700

800

PPS PPN PPP PPI PrivateHarbour

Har

bo

ur

un

it

145

Figure 6.11: Structure of Fishing Vessels in Indonesia’s Capture Fishery Industry, 2014

GT = gross tonnage. Source: SIDATIK (2015).

Figure 6.11 shows the lack of medium- to large-scale fishery. The current number of fishing

vessels with more than 30 GT is only 1.71% of the total vessels; in many cases, they often

face difficulties in anchoring because of the limited carrying capacity of fishing ports. Thus, it

is necessary to support the large fishing vessels (with more than 30 GT). Improving the

structure of fishing vessels to ensure the growing medium- to large-scale fishing industry is

strongly related to the improvement of the state and function of fish harbours and human

capital. In addition, to ensure the sustainability of the business and fishery resources, good

fisheries governance particularly through a tight permission system is needed. Such

governance could also be the way to fight illegal, unreported, and unregulated fishing.

Lack of High Value-added Products

As mentioned, most dried/salted, boiled, and paste fish products were processed in

traditional ways. The value-added products need to be promoted to respond to the changes

in the consumption and lifestyle of consumers.

Fish and Seafood Quality and Safety Issues

Many seafood products were rejected in the targeted market due to quality issues. It is

important to secure and improve the quality and safety of seafood products. The

improvement could be conducted along the supply chain of seafood products – from

< 5 GT153,49368.97%

5–10 GT41,37418.59%

10–20 GT14,3016.43%

20–30 GT9,5784.30%

30–50 GT1,0290.46%

50–100 GT1,7660.79%

100–200 GT840

0.38%

>200 GT176

0.08%

146

handling in the fishing boats, landing places, to the processing units up to the consumers.

The fish business may generate value-added products through improvement of handling and

processing (to generate new products) and producing live fish product. The study of Hartana

(2016) indicated that in 2005–2014, the US and Europe refused Indonesia’s fish products. In

the same period, the US Food and Drug Administration reported as many as 699 cases and

Europa-RASFF, 29 cases. The main causes of refusal by the US were filthy and salmonella-

infested fish from Indonesia; the EU found issues of histamines and poor temperature control

(The Economist, 2016). This information shows the need to pay attention to the quality and

safety of fish products which are also clearly related to the lack of a cold chain system.

High Disparity of Production and Processing Sites and Logistical Costs

The limitations of supporting infrastructure in fish production centres have led to a high cost

economy in the fishing industry. The expensive logistics costs, low quality of seafood

products, and high disparity of prices are the effects of these limitations. The Economist

(2016) stated that underinvestment had sent Indonesia’s logistics costs soaring, averaging

27% of GDP in 2004–2011, compared with 25% in Viet Nam, 20% in Thailand, 13% in Malaysia,

and 8% in Singapore).

Figure 6.12: Main Locations of Fish Production (2012) and Fish Processing Unit (2014)

Sources: Figure 6.10 and KKP (2014).

Weak Cold Chain System

As previously explained, cold storage, as an important part of the cold chain system to ensure

food safety and security, is not available in the production centres. In some cases, it is

available in the provincial capital but it is not so close to the main fishing ports or landing

places and are often left empty. Thus, improving the operation of national fish logistics will

be needed soon.

147

Lack of Market Competitiveness

As an exporter country, Indonesia is still behind other Southeast Asian countries, particularly

Viet Nam and Thailand. Even though it is the second-largest fish producer in the world, there

is still potential to expand production and market. The Economist (2016) stated that

Indonesia exports only US$4.2 billion-worth of fish annually, compared with US$5.7 billion

for Viet Nam and US$7.2 billion for Thailand, both of which have smaller coastlines and lesser

territorial water.

6.5. Seafood Supply Chain Model: A Case Study

The case study of six seafood businesses aim to find opportunities and challenges in different

types of seafood businesses in Indonesia as domestic and export market–oriented

commodities and in the type of marketplace, particularly in the traditional market, as main

transaction place for most Indonesians.

Lobster Supply Chain Model at the Southern Coast of Java

Lobster, a valuable marine resource in the southern coast of Java, particularly in Yogyakarta

Special Province (DIY), triggered social change among farmers and fishers. The high economic

value of lobster, as shown by its high price per kilogram ranging from Rp300,000 to

Rp1,000,000 in DIY depending on species and size, increases the intensity of its exploitation.

To conserve the lobster resources, government issued new policy on prohibition of lobster

catch with certain conditions. This case study aims to describe the supply chain model of

lobster and opportunities for better management at the southern coast of Java.

Lobster fishery at the south coast of Java can be categorised as small-scale fishery. The fishing

fleet uses outboard motor boats with gill nets and krendet (trap net) as main fishing gears,

and operates for 1 day. Five main species of lobsters are landed: Panulirus penicillatus, P.

homarus, P. ornatus, P. versicolor, and P. longipes.

The catch is generally sold by fishermen through fish auction and directly to middlemen.

Since not many landing sites conduct fish auctions, fishermen then directly sell their catch to

middlemen. Prices are generally determined by buyers.

The total stock of lobster in the Indian Ocean at the southern coast of Java (Fishing Area No.

473) is about 844 tons per year, with exploitation level (E) at 0.54. According to Ministry of

MAF Decree No. 47/2016, it is categorised as fully exploited, meaning that the fishing effort

needs to be secure at that level with tight monitoring. Compared to other fishing areas in

Indonesia, the state of lobster exploitation at the southern coast of Java is the lowest.

Therefore, there is still opportunity to promote lobster fishery with better management even

though the central government through the Ministry of MAF released a new policy (Decree

No 1/2015 revised to No 56/2016) to control the allowable size.

After the new lobster regulation issued in 2015, only lobster of standard size could be

auctioned and sold to exporters. The standard size allowed is a minimum carapace length of

148

8 cm and/or a minimum weight of 200 grams. Collector/middlemen sell the lobster from

auction to local companies (at the south coast of Java) and these companies sell the product

to other companies outside the area. The two main markets are Bali and Jakarta and lobster

is usually exported. In addition, these two regions are also the main domestic market for

lobster.

The study also found that undersized lobsters are also traded, especially in the areas around

fish landing places, which are also regional tourism centres. Until now, there are still debates

related to the academic foundation on the regulation of lobster size allowed be sold.

However, the uncertainty and weak law enforcement, on one hand, and availability of lobster

markets for all sizes (including prohibited size) on the other hand, threaten the sustainability

of lobster resources on the south coast of Java and of the lobster supply chain.

Figure 6.13 shows two main characteristics of the lobster supply chain in the southern coast

of Java: (i) regulated or allowable size model and (ii) prohibited size model. The first model

has many players, involving the fishers, auctioneers, traders, companies as exporter, and

various logistic services. Most of the lobster from fishers is sent to the domestic and/or

export markets. In the second model, lobster is provided only to local consumers through

peddlers or small-scale traders directly selling the product to consumers, particularly tourists.

Lobster from fishermen is sent by suppliers (mainly middlemen) to several large companies

or collectors in Yogyakarta, Cilacap, and Pangandaran (southern coast of Java), and Semarang

and Jakarta (northern coast of Java). Collectors also send lobsters to Bali, an outer island of

Java. Exports are generally carried out by companies based in Jakarta. Based on discussions

with the office of Fish Quarantine Agency of Yogyakarta, lobster shipping traffic through

Yogyakarta's Adisucipto International Airport showed there were 123–278 certificates, with

live lobsters numbering 35,675–93,629 in 2016–2018, in addition to non-living lobsters.

149

Figure 6.13: Lobster Supply Chain Model at the Southern Coast of Java

Fishers

Fish auction/

landing places

Collector/

trader

Middlemen

Peddler

Local/

domestic

market

Out-region

companies/

exporter

Export

Institutional

market

(domestic)

Local

companies

Our region

fishers/

suppliers

Allowable size

Prohibited size

Source: Author.

As lobster must be kept alive to keep its high value, the capture techniques, handling, and

transporting are still a challenge. Therefore, better technology is needed to ensure a high

survival rate in lobster fishery. The lobster market is still expanding, targeting export markets

and high-class consumers, particularly in main cities and/or tourism sites such as Bali and

Jakarta. Nevertheless, the local market for undersized lobster must be controlled to avoid

the catch that may trigger the rapid decline of lobster stock. Therefore, lobster management

must be enforced and the solution to the current situation must be discussed with all actors

in the lobster industry. The awareness of fishers, traders, and consumers related to lobster

regulation mush be raised through various government programmes, such as extension and

education programmes and alternative livelihood promotions. Such effort is needed because

the bigger the lobster size, the higher the price. For example, a 200–300 gram P. ornatus

costs only Rp400,000 per kilo, but as the weight increases to more than 1 kilo, the price goes

up to more than Rp1,000,000 per kilo. Similarly, the price of P. longipes is only Rp310,000 per

kilo for 200–300 grams¸ but increases to Rp720,000 per kilo if it weighs more than 300 grams.

The continuity of supply from capture fishery is still emerging, but lobster culture still lags.

The promotion of aquaculture is needed, starting from research and development of lobster

hatchery. This effort will impact the growing of a new industry, lobster culture, and the

rebuilding of lobster stock through a restocking programme.

150

Anchovy Supply Chain Model in Medan City, North Sumatra

This study was conducted in two close research sites with different characteristics: (i)

Belawan Bahari Village (fishing village) and (ii) Belawan Ocean Fishing Port (PPS) Medan City,

North Sumatra. Belawan Bahari fishermen carry out anchovy fishing operations for 1 day and

land the catch directly around the fishermen's settlement. For the PPS, fishers generally serve

fishing companies. Thus, the respondents of this study are fishermen who captured/landed

their catch, particularly anchovies in Belawan Bahari village and related buyers, and

respondents in fishing ports (anchovy fishing and processing companies and their buyers).

The landing in the fishing village was recorded by the local government and that for the

fishing port was conducted by the port authority. Based on data from the fishing port, total

landed in 2017 was 28,709 tons (valued at Rp826,172,604,000), a significant decline from

2012 (63,305 tons valued at Rp1,532,813,242,000). Ten dominant catch landed in PPS

Belawan: (i) mackerel scads – 7,371 tons (25.7%); (ii) common squid – 4,909 tons (17.1%); (iii)

Indian mackerel – 2,215 tons (7.7%); (iv) lizardfish – 2,118 tons (7.48%); (v) mollusc goatfish

– 2,002 tons (7%); (vi) croaker – 1,472 tons (5.1%); (vii) anchovy – 1,384 tons (4.8%); (viii)

yellow stripe scads – 1,159 tons (4%); (ix) Japanese threadfin bream – 1,092 tons (3.8%); and

(x) cuttlefish – 836 tons (2.9%). Most of the catch was sold as fresh fish product (74% of total

production) (KKP, 2017) while anchovies were mostly sold as processed product.

Anchovy (Stolephorus sp.), locally well known as teri medan, is a high-value commodity. The

average price is recorded at Rp80,000 to Rp100,000 per kilogram.

Figure 6.14 shows two main supply chain models of anchovies: (i) fishing village–based

production (community based) and (ii) fishing port–based production (enterprise based). The

main difference between the two models is the role of the trader, which is obvious for the

community-based model. However, the city market is the central market for anchovies

before these are distributed to the local markets, out regions, and the export market. This

figure shows the important role of the traditional city market in the supply chain model. As

discussed, the city market still plays a central role in the economic activities of many cities in

Indonesia.

151

Figure 6.14: Anchovy Supply Chain Model in Medan City, North Sumatra

Fishers

(catch, handling,

& processing)

Fishing village

(handling,

processing, sorting,

& packaging)

Storage

(handling, sorting,

processing &

packaging

Local consumer

City market

(Sambu Market)

Collector/

trader

Fishing port

Fishing

companies

(catch, handling,

& processing)

Out region

market &

export

Source: Author.

Anchovy is captured by trawler, set lift nets, and bagan (lift net). The catch is sorted to

separate anchovies from other fishes, and then cooked in a drum with a capacity of about 50

kilograms. Boiling and slicing are conducted on the fishing boat, and the drying process on

the ground in the port area or fishing village, and then packaged for the market. The total

volume of about 1,384 tons of anchovies was processed in port, though this number declined

compared to a few years back. Rahayu et al. (2017) recorded that, in 2015, 23 companies in

the fishing port produced 2,319.2 ton of anchovies. The prohibition of trawling in 2015

decreased anchovy production.

The main market of the production-based supply chain model is the city’s central market.

Almost half of production is distributed to the main market and other markets around the

city. Nevertheless, the anchovy is also distributed to other main cities, such as Pekanbaru,

Palembang, Padang (Sumatra islands), and Jakarta (Java island). For the export market, the

product is mainly exported to Southeast Asian countries and Japan.

Anchovy fishery still faces some challenges. The release of the trawling prohibition policy in

201514 significantly impacted anchovy fishery as shown by the declining fish production.

Although the policy has been ‘loosened’ due to demonstrations by various groups of activists

and fishermen, the impact was not fully restored. The trawling policy is still not cancelled;

therefore, more environment-friendly fishing technology is needed in anchovy’s fishery. In

addition, most anchovy products are handled on board (sea) and the drying process on land;

most dried products are sold directly to the local and domestic market and a few for export.

Value-added products other than dried are limited and need to be promoted through new

product innovation and packaging. In the meantime, the industry still faces low product

quality and safety issues.

14 Ministry of MFA Decree No. 1/2015 revised to 56/2016.

152

The anchovy industry still relies on small-scale individual business and lack of collective-based

business such as fishery cooperative and/or other business entities. Fish products are,

therefore, scattered in terms of location of production, price, and quality. The market of

anchovies as other fish products is still open for the domestic and export markets. There are

also various opportunities to prepare anchovy products to be easy to cook, ready to eat, and

with longer shelf life.

Seaweed Supply Chain Model in Makassar, South Sulawesi (Processing Unit)

China and Indonesia are the main producers of world seaweed, each with a share of 47% and

38.7%, respectively, of the total production of about 30.05 million tons (FAO, 2018).

Indonesian seaweed production increased almost three times between 2010 and 2015. The

rapid growth of seaweed culture is due to the development of cultivation of Kappaphycus

alvarezii and Eucheuma spp., which are the main raw materials for carrageenan extraction.

Figure 6.15: Indonesia’s Seaweed Production

Source: FAO (2018).

Seaweed has potential for development for several reasons, mainly:

⚫ Various species are feasible to develop in wide development areas.

⚫ Business capital is relatively small, the technology level is simple, and the harvest age is

relatively short (1.5–2 months).

⚫ Revenue is high, so there is potential to increase the income of the community and the

region.

⚫ Product can be diversified up to more than 500 end products.

0

2,000

4,000

6,000

8,000

10,000

12,000

2005 2009 2010 2011 2012 2013 2014 2015

911

3,915

5,170

6,515

9,299

10,077

11,269 11,631

Pro

du

ctio

n (t

ho

usa

nd

to

ns)

153

⚫ Provide high employment opportunities,

⚫ It has domestic and foreign market opportunities.

⚫ It can empower coastal communities.

In addition to the development of the food industry, the development of the health industry,

cosmetics, fertilisers, and seaweed-based renewable energy requires large seaweed supply.

Potential areas for the development of seaweed production centres are actually in

disadvantaged areas, especially in eastern Indonesia (KTI). At present, from 183 districts in

disadvantaged regions in Indonesia, 70% are estimated to be in KTI, an area dominated by

many islands. Some potential areas and which have been designated as centres for seaweed

development are Gorontalo Province, Southeast Sulawesi, Central Sulawesi, South Sulawesi,

Maluku, North Maluku, West Nusa Tenggara, and East Nusa Tenggara.

Not only upstream development but downstream development is also a strategy in

increasing commodity value added. Therefore, the downstream improvement is expected to

have an impact on strengthening the industrial structure, increasing added value, and

fulfilling the domestic market and increasing exports of processed seaweed. Because of

increasing market demand, the price of seaweed in the international market has reached

US$2 per kilogram (Tempo, 2013). Unfortunately, until now most Indonesian seaweed is

generally exported in the form of raw materials, particularly dried seaweed. On the other

hand, processed seaweed products such as agar, carrageenan, and alginate are still imported

in large quantities at high prices.

This case study was conducted at a seaweed processing company, so-called RAPUD, that

exports dried seaweed to an industrial estate in Makassar City, South Sulawesi. The business

started by educating seaweed farmers on how to cultivate seaweed, then buying their

product. The company even provides capital for production equipment. The company,

categorised as the early players in the seaweed business, was founded in 2002. The

warehouse/processing capacity of the company is around 1,000 tons per month but currently

only about 400 tons per month are processed. Companies buy dry seaweed from local

suppliers or assisted farmers (around Sulawesi) and outside the island, especially Kalimantan

and Tual, Maluku. Shipments from Sulawesi island use trucks; those from outside the island

use marine transport. Purchases are made with two systems, namely, the contract system

and fee system. The main buyer of dried seaweed for the company in this case is the

Philippines, but now other markets such as Europe also buy dried seaweed. However,

recently the main market of Indonesian seaweed is China (Figure 6.16). The export trend of

Indonesian seaweed was also dynamic, which grew faster in 2013–2015 and declined in 2016

(Figure 6.17). One reason for this, particularly the decline in 2016, was the prohibition policies

to export dried seaweed.15 In addition, the seaweed business still has many challenges, such

15 https://ekonomi.bisnis.com/read/20151102/99/488214/arli-larangan-ekspor-rumput-laut-

mentah-2020-perlu-kajian-mendalam.

154

as mix cropping pattern in which different species are cultivated in the same or nearby area,

competition among buyers for seaweed, seaweed diseases, and the quality of seaweed.

Figure 6.16: List of Main Importing Markets for Seaweed Product (HS Code 121221)

Exported by Indonesia in 2017

Source: International Trade Centre database, http://www.intracen.org.

Figure 6.17: Export Trend of Seaweed Selected Product (HS Code 121221) from Indonesia, 2013–2017

Source: International Trade Centre database, http://www.intracen.org.

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2013 2014 2015 2016 2017

101,547

118,759

156,259

100,972

132,048

89,904

136,450 127,216

70,195

135,283

Exp

ort

Qu

anti

ty (t

on

s) a

nd

Val

ue

(US$

tho

usa

nd

)

Exported quantity (Tons) Exported value (US Dollar thousand)

155

Figure 6.18 shows the typical supply chain model of the seaweed industry in the study site.

The main players in the business are farmers, collectors, processors (companies), and buyers.

The industry in the case study relies on dried seaweed from around Sulawesi and other

islands in the eastern part of Indonesia. Nevertheless, more than half of raw materials are

supplied by farmers from other islands. The distant source of raw materials has created

logistic problems due to the high cost of transporting raw materials from producers to

processors. The high competition over the local seaweed caused the company to find other

suppliers from outside the province (islands). To ensure the sustainability of dried seaweed

supply, the processors collaborated with producers (seaweed farmers) on technical

assistance, seaweed farmers’ training, and financial capital support. However, the seaweed

farmers are not well organised; therefore, it is important to strengthen collective-based

seaweed production to fulfil the need for standardised seaweed products from farmers and

to facilitate empowerment and cooperation.

Figure 6.18: Seaweed Supply Chain Model in Makassar, South Sulawesi

Seaweed Farmer

(Aquaculturist)

RAPID

(Processing Unit)

70% CT, 30% SP

Buyer

Sulawesi Farmer

(40%)

Out of Sulawesi

Farmer

(60%)

Nunukan,

Kalimantan

Farmer

(70%)

Tual, Maluku

Farmer

(30%)

Bantaeng

(Farmer)

Palopo

Wajo Bone

(Farmer)

Mamuju

(Farmer)

Bau-Bau

(Farmer)

Domestic

(20%)

Export

(80%)

Philippines

70%

China

10%

Others

(European)

Makassar SurabayaJakarta-

Bogor

Source: Author.

Indonesia, particularly South Sulawesi, is the major and rapidly growing producer of seaweed,

particularly for raw materials of carrageenan extraction. Seaweed culture can potentially

optimise marine space and solve many coastal community problems, such as poverty, as it

can be a new source of income. Nevertheless, seaweed production still faces the problem of

good seed quality and occurrence of diseases, locally called ici-ici, that may cause total loss

of seaweeds.

The current seaweed industry mainly focuses on the upstream side of the business,

particularly on producing wet and dried seaweed (farmer to processor), or lack of value-

added product (advanced processing industry). Most seaweed products, particularly dried

156

seaweed, are exported as raw materials. Therefore, the downstream step is expected to

impact on strengthening the industrial structure, increasing added value, fulfilling the

domestic market, and increasing exports of processed seaweed.

In particular, the export market for seaweeds, whether as raw material or end product, is still

expanding. The domestic market, particularly for food and health, is also growing. However,

the processing industry is still lacking in number and many in the industry rely only on dried

seaweed products.

Fish Supply Chain Model at Traditional Markets in Yogyakarta City

The number of traditional markets in Indonesia is very large, more than 13,450 markets, with

total traders reaching 12.63 million people. The market is not only a place of economic

transactions but also a public space where social interaction takes place. However, the

traditional market mostly has a negative image of being chaotic, uncomfortable, and a place

with minimal facilities. Revitalisation of the traditional market is needed and is a long-term

investment as part of the city’s development. In many cities in Indonesia, the traditional

market symbolises the face of the city – a well-organised traditional market means the city is

also well managed. The traditional market has also become a national indicator of domestic

inflation.16

This case study has been conducted in one of the central markets in Yogyakarta city, the so-

called Beringharjo Market. It is the largest traditional market in Yogyakarta owned and

managed by the city of Yogyakarta. This market is located in the Malioboro area, which is an

area at the centre of DIY. The strategic location and proximity to tourist centres makes

Beringharjo Market the main destination of raw materials of any product, including fish. In

terms of fish consumption, this province is one of the lowest fish consumers compared to

the other provinces of Indonesia. But the growth in consumption recently became the

highest in the country. It was projected that, until 2014, the province needed about

89,614.30 tons but the fish products were mainly imported from other regions around the

province.

The study showed that fish commodity in Beringharjo Market consists of marine, freshwater,

and processed fish, such as salted fish and bandeng (milkfish) presto (softened bone) product.

About 86% of fresh fish in the market comes from outside DIY and only about 14% are local

fish. Ninety percent of freshwater fish is from outside DIY and ten percent is from a local area

in DIY. Salted fish and milkfish as raw material are both 100% from outside DIY.

Analysis of the supply chain pattern of fish processing units (UPI) in DIY shows a distinctive

pattern in supply chain management, especially in the supply of raw materials to UPI. There

are two general trends from the case study in DIY related to the management of raw

materials from marine products: (i) UPI generally manages raw materials that are not from

16 Traditional markets provide the majority of people's basic needs and are central to regional economic activities, so the dynamics of prices of basic necessities in the traditional markets might become an indicator of regional economic conditions.

157

DIY but imported from outside DIY, and (ii) DIY fishery products as a source of raw materials

are generally brought outside DIY. These findings illustrate the characteristics of UPI that

have little connection with DIY production or local DIY suppliers for the supply of raw

materials. This is caused by several factors, including processed fish whose species are scarce

or are not produced in DIY such as milkfish, limitations and uncertainties of local fish as raw

materials, and local fish that tend to have good distribution channels outside the region.

Figure 6.19 shows a supply chain model for fresh fish involving three parties: the suppliers,

the sellers, and the ultimate customers. The supply chain model for processed fish involves

four parties: the suppliers, the wholesalers, the retailers, and the ultimate consumers. Finally,

the supply chain model for milkfish comprises the suppliers, the UPI, the wholesalers, and

the ultimate consumers.

Figure 6.19: Fish Supply Chain Model at Traditional Market in Yogyakarta City

Out of

Region

In City/

Market

Marine fish

Supplier

from out

region

Institutional

market

Traditional market

surround

Peddler

End consumer

Out of

Region

Freshwater fish

Central market in

Semarang City

(Kobong Market)

Fishers

Aquaculturist

Fish

auction

Traders/

Processing

industry

Main traditional

market

(city market)

Local

supplier

Source: Author.

The traditional market, as found in this case study, has become a place for nurturing

entrepreneurs and prospective entrepreneurs with their own capital. Nevertheless, most

such entrepreneurs lack an understanding of consumer behaviour, including in seafood

products. Therefore, apprenticeship, training, and education are needed. In addition, the

traditional market as, in this case, also provides various fish products – marine fish,

freshwater fish, and processed fish – that are originally from various regions. Being a

perishable good, fish gets easily spoiled without a cold chain system. Therefore, it is

important to improve the distribution and cold chain management systems in the traditional

market. Provision of support for traders, such as for insurance and financial capital, is still

needed.

158

Tuna and Tuna-like Supply Chain Model at Fish Processing Unit in Bitung City, North

Sulawesi

The city of Bitung is located on the edge of the Pacific Ocean. The city is the main producer

of fish, particularly tuna and tuna-like, in North Sulawesi Province and Indonesia. The city’s

fishing industry is centred at the Bitung Ocean Fisheries Port (PPS). Based on the 2016 PPS

Bitung Annual Report (PPS, 2016, 12,973 fishing fleets visited the port, including 1,592

outboard motor boats (12%), most of which were motorised boats under 30 GT (76%), and

the remaining motorboats were over 30 GT.

Fish production is mainly through purse seine fishing gear (77%), followed by pole and line

(10.9%), and handline (9.8%); total fish produced was 46,522 tons. Fish production grew from

30,018 tons in 2012 to 111,315 tons in 2014. However, in 2015, it declined significantly and

had not returned to a convincing growth in 2016, reaching only 46,552 tons. This decrease

was mainly due to new regulations relating to capture fishery to reduce the problems of

illegal, unreported, and unregulated fishing.17

Skipjack tuna and tuna are the main fish products landed in Bitung PPS. In 2012–2016, the

average production of skipjack tuna reached 34,001 tons/year, while that of tuna was 11,826

tons/year. In addition to skipjack and tuna, cob is also an important commodity in the Bitung

PPS. The average production of cob reaches 7,166 tons/year.

Overall, there are 60 fish processing companies (large-scale UPIs) and two of them are no

longer operating. The main products of UPI are various processed tuna, cob, and skipjack,

both in the form of fresh, frozen, or canned fish. The city is the centre of the fish processing

industry, particularly for tuna commodities. In addition to the large-scale fish processing

industry, Bitung city also has a growing group of fish processing totalling 21.

The fish processing industry mostly processed fish for the export market. Fish exports

continued to increase in 2010–2014, from 29,109.8 tons in 2010 to 32,574 tons in 2014.

However, export volumes declined to 18,658.4 tons in 2015 and 15,800.4 tons in 2016. The

new regulation related to fishery management, such as prohibition of transshipment and ex-

foreign fishing vessels, created a raw material shortage for the industry.

17 Illegal, unreported, and unregulated (or IUU) fishing is a broad concept found in all types and dimensions of fisheries, on the high seas and in areas within national jurisdiction. It concerns all aspects of and stages in the capture and utilisation of fish. It may sometimes be associated with organised crime, http://www.fao.org/iuu-fishing/background/what-is-iuu-fishing/en/ (accessed 22 May 2019).

159

Figure 6.20: Fish Supply Chain Model of Tuna and Tuna-like in Bitung City

In the city

Import

Fishers

Domestic

market

Fish processing

unit

Collector/

trader/supplier

Fishing port

Fishing

companies

Export market

Source: Author.

Two main policies directly impacted Bitung city’s fishing industry: (i) the Ministry of MAF

Decree No. 56/2014 concerning temporary termination (moratorium) of licensing of capture

fisheries business and (ii) the Ministry of MAF Decree No. 57/2014 concerning the

termination or prohibition of transshipment activities. In addition, the UPI in Indonesia is

dominated by traditional home-based UPI (accounting for 97.67%); modern units including

this case study account for 2.33%. Therefore, supporting the growth of such modern UPIs is

important.

The banning of foreign and ex-foreign fishing vessels, the government’s policy to fight illegal

fishing, since 2014 has significantly impacted the fishery industry and the city of Bitung, as

the region heavily relies on the fishery industry. Fish production even declined 59% in 2015

(to only 45.209 tons). Such situation impacted on the UPI that was having difficulty getting

raw materials. As a result, processing units were forced to reduce the number of workers;

some of them closed and did not operate anymore.

The decline in fish production will automatically reduce the industry's market share, which is

marked by a decline in fishery product exports. To deal with the issues, the processing units

imported raw materials from other countries and transported in from outside the region.

Reassessment of current policy particularly by promoting the development of national

fishery will be needed.

Based on the recommendation of the Regional Fisheries Management Organization,

increasing the number and capacity of the national fishing fleet to exploit tuna resources

would need support from the policymakers such as simplifying and accelerating the licensing

160

process. Empowering and increasing the role of national fishery companies18 are needed to

manage the upstream side of the tuna fishing industry.

The national fish logistics system19 could be improved by strengthening the national tuna

commodity business chain. This effort can be pursued by developing eastern Indonesia as a

source of raw materials while strengthening the infrastructure for the fish processing

industry and still maintaining Indonesia's western region as one of the centres of the fish

processing industry.

6. Conclusion

Fishery plays an important role for Indonesia as a main source of animal protein and primary

nutrition for most people, of main livelihood and income, and of foreign exchange for the

country.

Despite being an exporter country, Indonesia is still behind other countries, particularly Viet

Nam and Thailand even if Indonesia is the world’s second-largest fish producer and there is

potential to expand its production and markets. Its strong outward-looking policy must be in

balance with its inward-looking policy orientation because of the rapidly growing new trend

in fish import in the last decade.

The fishery sector received a big push when the current government clearly stated the need

for the country to be with the ‘world maritime centre’ (poros maritim dunia) and issued

Presidential Instruction No. 7 of 2016 on Accelerating the Development of the National

Fisheries Industry. The strategy is expected to resolve the fundamental problems of fishery

related to the lack of infrastructure of fishery production, the weakness in fish supply chain

and logistics, the lack of fish quality, and less harmonious fishery policies.

Strengthening the fish business in the upstream sector should be prioritised to ensure the

development of downstream industries. With the potential of fishery resources, Indonesia

could become the world's fish barn (lumbung ikan dunia).

A few challenges need to be addressed in each supply chain:

⚫ In the upstream (production) site

The lack of supporting production infrastructure, such as the lack of modern and well-

managed fishing ports, still emerges. Most or more than 91% of the total fishing ports are of

lowest class or traditional and nature based. The fishing ports also lack facilities such as cold

chain systems. A national fish logistic system should be implemented to optimise the use of

fishery resources and to ensure food safety and food security.

The main production facilities are also weak. Most of the fishing vessels are small scale

(87.6% are under 10 GT) and dominate coastal-based fishery. This fishery is also challenged

18 State-owned enterprises: Badan usaha milik negara (BUMN). 19 National Fish Logistic System: Sistem Logistik Ikan Nasional (SLIN).

161

by the declining trend in coastal-based fishery resources. The promotion of middle- to large-

scale fishery (offshore fishery), which is serviced by only 1.71% of the total fishing vessels

(with less than 30 GT), is needed. In the meantime, the training of fishers and managers for

the medium- to large-scale fishery is needed to ensure the availability of human capital to

manage the fishery.

As shown by the case of anchovies and lobster fishery, two examples of coastal-based fishery,

it is important to enhance proper fishery management to ensure the sustainability of the

fishery and community livelihood. Meanwhile, there is still opportunity to expand fishery to

the offshore.

In terms of mariculture, particularly seaweed culture, the problems of good seed quality and

occurrence of diseases, such as ici-ici, are still emerging. Therefore, a seaweed seedling

system and/or centre that can produce good quality and superior seeds is important.

⚫ In the midstream (handling and processing) site

The lack of a cold chain system that impacts the quality of fish products still emerges. The

rejection of seafood products by the market is mainly due to quality issues. Therefore,

implementing and improving a national fish logistic system is important to secure and

improve the quality and safety of seafood products. Emerging logistical problems result in

high-cost fishery, low quality of products, and big price disparities. The improvement could

be implemented along the supply chain of seafood products – from handling in fishing boats,

to landing places, to the processing units until the final consumers.

The case of anchovies and seaweed shows that most fish products are processed in a

traditional way (dried/salt, boiled, and paste). Value-added products must be promoted to

respond to the changes in the consumption and lifestyle of the consumers.

High-value products could be promoted by producing live fish, such as in the case of lobsters.

In fact, many mariculture products, such as grouper, also keep their high value added by

being sold alive. Therefore, it is important to improve the handling and transportation system

from the producer to the consumer.

⚫ In the downstream (market) site

The fish market is open and growing for the domestic and export markets. Indonesia’s

domestic consumption trend shows that fish consumption is still growing. In addition, the

export market of Indonesian seafood also increases, even though growth has been slow since

2015 due to various policies that impact on the processing industries that could not achieve

their normal producing capacity.

The competitiveness of Indonesia’s seafood products is still weak. As an exporter country,

Indonesia is behind other countries, such as Viet Nam and Thailand in terms of value-added

products. While Indonesia is the world’s second-largest fish producer, there is still potential

to expand its production and its markets.

162

The role of the traditional markets in Indonesia’s domestic market is obvious. The traditional

markets provide various fish products – marine, freshwater, and processed fish – that are

originally from various regions. As perishable goods, fish products easily get spoiled due to

the lack of cold chain systems. Therefore, the distribution and the cold chain management

systems in the traditional market should be improved.

Despite these challenges, fishery products can potentially support Indonesia’s economic

growth as a source of livelihood of fishers.

References

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